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Foreign direct investment and the demand for protection in the United States

Author

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  • Goodman, John B.
  • Spar, Debora
  • Yoffie, David B.

Abstract

Over the past decade, foreign direct investment (FDI) in the United States has grown dramatically, changing the composition of many U.S. industries and bringing foreignowned firms into the domestic political process. Presumably, FDI also has affected the politics of protection, by both altering the domestic coalitions around protectionist demands and shifting the potential benefits that protectionism is likely to bring. To understand this process, we create and test a model that examines the level of inward investment and the extent to which this investment either complements or substitutes for existing import levels. Import-complementing investment, we suggest, will cause a split in protectionist demands, with local producers favoring protectionism and foreign investors pushing for free trade. Import-substituting investment, by contrast, will create convergent interests between local and foreign producers. In both cases, inward FDI reshuffles traditional alliances and demands for protection, challenging many prevailing views about protectionism in the United States.

Suggested Citation

  • Goodman, John B. & Spar, Debora & Yoffie, David B., 1996. "Foreign direct investment and the demand for protection in the United States," International Organization, Cambridge University Press, vol. 50(04), pages 565-591, September.
  • Handle: RePEc:cup:intorg:v:50:y:1996:i:04:p:565-591_03
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    Cited by:

    1. Robert C. Feenstra, "undated". "Facts And Fallacies About Foreign Direct Investment," Department of Economics 98-04, California Davis - Department of Economics.
    2. Blonigen, Bruce A. & Ohno, Yuka, 1998. "Endogenous protection, foreign direct investment and protection-building trade," Journal of International Economics, Elsevier, vol. 46(2), pages 205-227, December.
    3. Robert E. Lipsey & Robert C. Feenstra & Carl H. Hahn & George N. Hatsopoulos, 1999. "The Role of Foreign Direct Investment in International Capital Flows," NBER Chapters,in: International Capital Flows, pages 307-362 National Bureau of Economic Research, Inc.
    4. repec:spr:manint:v:46:y:2006:i:1:d:10.1007_s11575-007-0050-0 is not listed on IDEAS
    5. Powell, K. Skylar & Lim, Eunah, 2017. "Investment motive as a moderator of cultural-distance and relative knowledge relationships with foreign subsidiary ownership structure," Journal of Business Research, Elsevier, vol. 70(C), pages 255-262.
    6. Eden, Lorraine & Molot, Maureen Appel, 2002. "Insiders, outsiders and host country bargains," Journal of International Management, Elsevier, vol. 8(4), pages 359-388.

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